The State will be bigger – much bigger – in future. This is the key economic message in the framework document for Government negotiated between Fianna Fáil and Fine Gael. But there is no indication of how this will be paid for, beyond a recognition that borrowing will increase in the short term.
The document goes out of the way to outline what is being ruled out in terms of raising revenue – no higher income tax or USC and no welfare cuts. But beyond a nod to higher carbon tax, there is no indication of where taxes might be raised or spending cut in lower priority areas in the term of the next government to pay for key priorities such as healthcare and housing. The document refers to the “reality” of financial constraints, but tells us nothing about how the new government might deal with these, or stop the budget deficit from spiralling every upwards.
Running to a well spaced out 24 pages, the document is light on detail and heavy on aspiration. We can only assume that in their lengthy engagement the two parties have had more detailed discussions on key areas than is reflected in what is published. Otherwise you would have to wonder what they have been up to .
The framework has nothing in it in terms of economic direction which will frighten off any of the smaller parties – which is presumably why it is so bland – though of course they may still find things to object to. It singularly fails to spell out the challenges which lie ahead in managing the public finances. It says the State will abide by EU fiscal rules, but not how this will happen.
References to a bigger State are everywhere and go beyond the coronavirus crisis, which is presented as a turning point. The document says there will be “ no going back to the old way of of doing things”. The Sláintecare programme will be brought forward in healthcare, the State will be “at the centre of the housing market” and a “new national social contract” will promise people affordable healthcare, housing, education, childcare and disability services.
There will also be a “new green deal” with a promise to revisit carbon reduction targets and to look at the economic recovery via a “green lens”, but not much detail on what this means. One of the few firm new indications is a commitment to have 20 per cent home and remote working in the public sector and public bodies by 2021 – and to encourage the private sector to do likewise.
There is no assessment in the document of the financial cost of the crisis, the price of other promises in areas such as healthcare and housing or the inevitability of a budget constraint, which means everything will not be affordable. The State is already facing into financial markets, fortunately with the support of the European Central Bank, to raise billions to pay for the crisis. So far interest rates remain rock bottom. But what the markets will look like in six months time is anyone's guess. And the people lending us money will look for detailed financial plans and a realistic assessment of how much we expect to borrow and how we will balance tax and spending plans. A new national economic plan is promised to outline all this, but we are not given any hints on how the inevitable difficult decisions will be made – and it is these that will dominate the term of the next government.
The document only refers to the fact that cash is not limitless in passing where it says: “While recognising the reality of financial constraints, the overarching objective of government will be to rebuild the economy and get people back to work.” This is fair enough. But the new government, if one is now formed, will have to face up to a host of choices on how this will all be paid for. We are little wiser, on the basis of this document, on how those calls will be made.
